Three's owner Hutchinson Whampoa is in "exclusive" talks with Telefónica over the acquisition of UK network O2.

Hutchinson Whampoa has confirmed in a statement that it has been negotiating for "several weeks". It offered £9.25 billion in cash and up to a further £1 billion when cash flow for the joint businesses is assessed.

The story first broke in The Financial Times, which stated that Hutchison Whampoa will make a deal announcement sometime "tomorrow". That has now appeared, and the company confirmed that Telefónica is not talking to any other buyer.

Pocket-lint also received a statement from a spokesperson at O2, highlighting that the deal will benefit customers of both existing networks:

"We await the outcome of Telefónica’s exclusive negotiations with Hutchison Whampoa," the company told us. "Subject to agreement as a result of these negotiations and any necessary approvals including merger clearance, this will strengthen our future as a leading, and highly trusted UK communications provider at a time when the demand for mobile connectivity has never been greater.

"Three is known for campaigning on behalf of its customers, much like O2. We are confident that an agreement will mutually benefit the customers of both companies, as well as drive better value, quality and investment in one of the most digitally competitive countries in the world."

However, industry analyst Kester Mann from CCS Insight suggested that the deal could have a side effect - rising mobile bills.

"The deal might not necessarily be good news for consumers," he told us. "Evidence in other European markets shows that mobile tariffs tend to rise following in-market consolidation. Regulators will be keen to ensure this is not the case in the UK."

Keep in mind Telefónica is a Spanish telecoms group with high net debt. It is likely hoping to score cash and exit Britain.

Hong Kong tycoon Li Ka-shing is the chariman of Hutchison Whampoa and controls Three. He already bought Telefónica's Irish business for £650 million, in order to combine it with Three Ireland, and he recently picked up UK’s Eversholt Rail Group for £1.1 billion.

Although Ofcom, the industry's regulators, wants at least four competitors in the UK, the combination of Three and O2 would create the UK’s largest mobile group with roughly 31 million subscribers. EE would be the second-largest mobile operator.

Telefónica and Hutchison Whampoa are allegedly prepared to fight any buyout objections by pointing to the £12.5 billion acquisition of EE by BT.

READ: Is a tycoon about to drop £9 billion to buy O2 and merge it with Three

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  • Source: FT